SAFETY NET POLICY COMMITTEE NOTES

OCPA SEMI-ANNUAL MEETING
Ontario Corn Producers’ Association
September 11, 2007

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Safety Net Policy Committee

Canada's Federal Government on Track to Deliver $1 Billion in Funding to Farmers

As you may recall back on March 9, 2007, the Prime Minister announced $1 billion in new funding for agriculture, with the intent to improve national farm income programs. There were actually 2 parts to this funding announcement; $400 million was to be spent on a cost of production payment and $600 million was to be used as seed money to fund a farmer savings account program under a new business management suite that will replace the Canadian Agricultural Income Stabilization (CAIS) program.

"NEW" CAIS

The ministers have agreed to an evolution towards a new business risk management suite. The new suite intends to replace CAIS with programs that are said to be more responsive, predictable and bankable for producers. The new programs can be described under the following 4 titles:

Stay tuned, as further details on program design and enrolment will be made available this fall.

Cost of Production (COP) Payment

The $400 million COP payment is a direct payment to producers to help them deal with rising costs in recent years. Producers of non-supply managed commodities reporting farm income for tax purposes for 2004 are eligible for the program. These same producers who are part of the CAIS program do not need to apply for the program. New producers of non-supply managed commodities reporting farm income for the first time in 2005 and 2006, or producers that are not part of CAIS, are also eligible but need to apply for the program. These applications were available in late May, with the first payments occurring in late June. The deadline to apply for the program was September 1, 2007

For producers who farmed in 2004, the initial payments were based on 2.36 percent of an average of their net sales of qualifying commodities for the 2000 to 2004 period. Producers who began farming after 2004, their payments were based on 2.36 percent of an average of 2005 and 2006 net sales. The federal government will administer the program for all provinces except Quebec, and they hope to have all the initial payments out by October which should use most of the allotted funds. Final payments will be distributed in December if any funds remain.

In the future, the federal government has also committed $100 million annually that would be paid into producer savings accounts to address increasing production costs.

McGuinty Government Helps Relieve Cost of Production Pressures for Ontario Farmers

In a September 4th news release, the McGuinty government announced that it is following through on their June 8th announcement to provide a 40 percent provincial match on the $400 million federal cost of production payment program. Ontario is participating on a cost share basis, which amounts to approximately $55 million. The Ontario Cost Recognition Top-Up Program, administered through Agricorp, will start to flow dollars as a direct payment within days, promised Ontario's Agricultural Minister Leona Dombrowsky. Agricorp has been working with both the federal and provincial governments to co-ordinate data, and deliver the program in a timely manner.

Any producer who was eligible and received a federal payment will automatically receive a provincial top-up equal to two thirds of the federal payment. These payments have been delayed compared to the federal payments; the main reason being the Ontario government was not able to begin making payments until the federal government transferred the payment data to Agricorp.

Risk Management Program to Help Farmers Compete and Succeed

In an August 22, 2007 announcement on the farm of OCPA director Lloyd Crowe, the McGuinty government showed their support for Ontario Grains and Oilseeds farmers by introducing the Risk Management Program (RMP). It will be administered as a three year pilot program designed to help farmers offset losses caused by low grain and oilseed commodity prices that are a result of foreign subsidies. The program will begin with the 2007 crop year, and Agricorp will deliver the program for grains and oilseeds producers.

The program Premier McGuinty announced is nearly identical to the RMP proposed by the grains and oilseeds safety nets committee over the past couple years. Producers who want to participate in RMP must also participate in Production Insurance (PI) and the Canadian Agricultural Income Stabilization (CAIS) Program. Producers must enroll in all three programs for all three years, with the exception being 2007 PI as some of those deadlines have already passed.

In order to participate in RMP, producers must grow one of 20 eligible grains and oilseeds crops. They need to enroll all their eligible crops for the full three year pilot. Since there are a number of "minor crops" which don't have PI programs available, the PI requirement will be waived for any year in which no PI plan exists for a particular crop. As part of the announcement, the RMP premiums are being waived for the first year of the program (ie. 2007).

Applications are planned to be available in September. Any producers who are currently enrolled in PI will automatically receive RMP handbooks and applications in the mail. Those producers whom are not enrolled in PI are encouraged to contact Agricorp for an application or download one from their website when they become available.

Payments for the program will be triggered when prices for eligible commodities fall below their specific support price. For most eligible commodities, two payments could be issued for each crop year (likely spring and fall). The first payment (typically fall) will be based on the average of forward contract prices for six months prior to harvest of each commodity. The second payment (typically spring) will be based on the average of cash or spot prices for six months during and after harvest. Each payment will be based on the difference between the support price and the average market price from the preceding six month period, multiplied by 50 percent (or 100 percent if only one payment) of the producer's current acreage and long term yield. Finally, this amount is multiplied by 40 percent to reflect the provincial government's normal share of funding in a cost-shared program.

RMP payments will be counted as an advance on the provincial portion of an individual's CAIS payment for the corresponding program year. Producers will be allowed to keep the greater of either the RMP or provincial CAIS payments. If the provincial portion of a final calculated CAIS payment exceeds the previous RMP payments, the producer will receive the additional payment for the difference. If the provincial payment is less than the combined RMP payments, the producer will keep the entire CAIS payment and it's not considered a CAIS overpayment. However, in instances where overpayments have occurred from other provincial programs (ie. previous CAIS advances), they will be recovered from RMP payments.

As per the original grains and oilseeds design of RMP, the three year pilot will include an annual cap on the total payment a producer may receive; these are $130,000 per individual (sole proprietors) or $390,000 (maximum of three individuals) per corporation or partnership.

A review committee has been struck to look at many aspects of the program in order to make improvements where necessary.

As was mentioned earlier, this program is technically only being funded 40 percent, which is the typical federal/provincial cost sharing that occurs with these types of programs. More work is being done at the federal level by the federal coalition, Ontario-Quebec Grain Farmers Coalition (which is comprised of the Ontario Grains & Oilseeds Safety Nets Committee and the FPCCQ), to secure the other 60 percent the program is currently lacking, in making it the effective program for grains and oilseeds producers it was designed to be. In addition, producers are strongly encouraged to contact their local MPs to discuss the need for a fully funded RMP.